By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

ISLAND Luck’s principal is alleging that the Government “misled” him over planned web shop tax increases, adding: “My legitimate expectation in a proper consultation was dashed.”

Sebas Bastian, in an affidavit supporting the operator’s Judicial Review challenge to the 5 percent “patron tax”, alleges that the taxation proposals discussed when he met with the Prime Minister almost a fortnight before the May 30 Budget bore little resemblance to what what was ultimately imposed.

He argues that there was no mention of the “sliding scale” system, where revenues attract a higher tax rate the more a web shop earns, while officials spoke of a 5 percent levy on patron “winnings” - not one on deposits and over-the-counter (OTC) lottery sales. The latter was the option selected in the Budget and, as a result, Mr Bastian is branding his May 14, 2018, meeting with Dr Hubert Minnis, two Cabinet officials and senior Ministry of Finance officials as “meaningless” because the proposals discussed were markedly different from the 2018-2019 Budget announcement.

Besides Dr Minnis, others present included Dionisio D’Aguilar, minister of tourism with responsibility for gaming; Brent Symonette, minister of financial services, Immigration and trade and industry; Marlon Johnson, acting financial secretary; and Viana Gardiner from the Prime Minister’s Office.

“At the meeting, [Mr] Johnson said that the Government wanted to increase taxes on gaming house operators for the 2018-2019 Budget,” Mr Bastian alleged.

“The Government represented that it was proposing to increase the 11 percent tax on gross gaming revenue by two to three points; transfer to the Government the 2 percent of gross gaming revenue for community rehabilitation and charitable causes; and to introduce a 5 percent tax on all patrons’ winnings.”

While the Island Luck chief was invited to respond to these plans, Mr Bastian alleged: “In that meeting, the Government never disclosed that a sliding scale of 20 percent to 50 percent of taxable revenue was being considered.

“Therefore, I never had an opportunity to address it, which led me to believe that I had been misled during that meeting to which I had been invited. My legitimate expectation in a proper consultation was dashed.

“The consultation was meaningless, as I could not have given an intelligent consideration of, and an intelligent response to, a proposal that was never presented to me at a formative stage. I learned about the sliding scale tax and the patrons’ deposit tax two weeks’ later on May 30, 2018, during the Budget presentation.”

Under the “sliding scale” tax structure, web shops pay on each portion of their revenue:

• Up to $20 million in revenue, a rate of 20 per cent.
• Between $20 million and $40 million, a rate of 25 per cent.
• Between $40 million and $60 million, a rate of 30 per cent.
• Between $60 million and $80 million, a rate of 35 per cent.
• Between $80 million and $100 million, a rate of 40 per cent.
• Over $100 million, a rate of 50 per cent.

Mr D’Aguilar said five out of seven web shop operators fell solely in the lowest 20 percent category, while for a sixth, only a small portion of its revenue fell into the 25 percent category. Only Island Luck, the market leader, whose revenues will attract all tax rates.

Mr Bastian, meanwhile, said he warned the Government that the new and increased taxes would have unintended consequences for the industry.

“I... cautioned the representatives of the Government that any increase of taxes on gross gaming revenue, or any direct tax on patrons’ winnings or patrons’ deposits would be reckless without prior empirical study and technical advice,” he alleged, “and may have the unintended consequences of reducing the gross gaming revenue of licensed gaming house operator and channeling gaming patrons into the growing unregulated gaming market.”

Mr Bastian said he shared several international studies with the Prime Minister, and his fellow ministers, on “optimal tax rates and different tax methodologies, consistent with best international best practices from many of the regulated jurisdictions for online” gaming.

The Island Luck principal is arguing that the Gaming Board and minister of finance, K P Turnquest, “had a duty to act fairly, reasonably and consult” the web shop industry on any changes impacting their gaming control systems and platforms.

He also asserts that the sector had “a legitimate expectation that” it “would be consulted and treated reasonably and fairly” relating to any tax matters, and not doing so would be “irrational and unfair” given the implications for compliance with the Gaming Act 2014 and accompanying regulations.

The Government on Friday agreed to postpone implementation of the 5 percent patron tax until Island Luck’s, and three other web shops’, separate Judicial Reviews are heard by the Supreme Court on October 5. The “sliding scale” structure, which took effect from July 1, has also been postponed.